The Price Tag on a Patient-Centered Medical Home

Everyone in the health care world has one eye on Washington this week, as the Supreme Court is expected to finally hand down their ruling on the constitutionality of the Affordable Care Act. Commonly known as the “health care reform bill” or “Obamacare,” depending on your political leanings, the legislation contains both immediate changes (the much-discussed “individual mandate” to buy health insurance) and money for testing ideas to slow down runaway spending. Prominent among these health care models is the patient-centered medical home (PCMH), where primary care clinics are strengthened to more effectively see, treat and track patients. Preliminary studies have shown that PCMHs can save health care dollars by keeping patients out of the hospital and emergency rooms. But what about the costs of implementing the PCMH model?

Robert Nocon and Marshall Chin of the University of Chicago Medicine led an effort to calculate this price tag for the patient-centered medical home. Published yesterday in the Journal of the American Medical Association (and simultaneously presented by Nocon at the AcademyHealth conference in Orlando), the study finds that the upgrades necessary for meeting the goals of a PCMH aren’t free. Even if those costs are far small compared to the estimated savings, the current health care system does a poor job of connecting the two, the authors said, putting the sustainability of the model at risk.

“We’re not saying that the medical home costs too much and we can’t do it,” said Nocon, Senior Health Services Researcher at the University of Chicago Medicine. “Primary care providers today are being asked to implement a model and improve care in a way that will hopefully benefit patients and hopefully have a lot of good downstream impacts, but in a way that doesn’t have downstream financial benefits for them. Instead, we need to build a system that promotes the care that we want to happen.”

Establishing a PCMH means improving a clinic along several different dimensions, such as round-the-clock service for patients, tracking and coordinating patients when they are sent to specialists, getting test results to patients quickly, and a strong quality improvement program. These measures may require investment in additional personnel, electronic health record technology, and other expenses. However, in theory, some of these new features could also save money for the clinic, balancing out the additional costs.

To estimate the bottom line of building a PCMH, Nocon and colleagues matched up two databases. A 2009 survey of 669 federally qualified health centers across the United States provided the raw data to rate each clinic on a “Safety Net Medical Home Scale,” which rated their fulfillment of PCMH goals from 0 (worst) to 100 (best). Those ratings could then be compared to expense reports filed by the clinics with the federal agency that provides the bulk of their funding.

For real world practicality, the authors calculated the cost of improving a clinic by 10 points on their PCMH scale: $2.26 per patient per month. Out of context, that figure sounds as insignificant as large coffee, and it pales in comparison to the $18 per patient per month in savings that one study estimated a PCMH model saves by keeping patients out of hospitals and emergency rooms. But when that two dollars and change is spread out over the 18,000-some patients a typical clinic carries, it means an extra $500,000 in costs annually for non-profit businesses with slim budget wiggle room.

“We know that the margins are thin in primary care, and our analyses show that the cost impact of this model is enough to eat into that significantly,” Nocon said. “The things that we’re asking these clinics to do as part of this model have a cost impact, and if we don’t find ways to ensure that they can share in the financial benefits, it really is a risk to the sustainability of the entire model.”

The trick to making PCMHs a sustainable solution for health care spending will thus be connecting the savings the model generates with the additional costs. A portion of the Affordable Care Act, funded the testing of some models that might bridge this gap, such as accountable care organizations which provide both primary care and hospital care for its patient pool, receiving payment based on the health outcomes of those patients instead of the current “pay-for-service” system. Additional incentives or increasing the reimbursements for primary care physicians who will be increasingly important in a PCMH model would also help these clinics absorb the additional financial demands of providing these extra services.

“In many ways, the patient-centered medical home is preventative care that keeps people from getting sick enough to go to the hospital in the first place,” Chin said. “If we can shift the money we save from preventing that hospitalization or emergency department visit up front to preventive care, then that’s one of the most promising solutions for how we can reduce the overall rate of rise of the U.S. health care budget and improve care at the same time.”

An accompanying editorial, written by Robert Reid and Eric Larson of Group Health Research Institute, agreed with Nocon and Chin’s assessment, and points out that funding the construction of PCMHs will not just reduce spending overall, but translate into better care for populations who need it the most.

“For 40 years, federally funded community health centers have provided health care services for these patient populations,” Reid and Larson write. “Gains promised by the medical home should be highest in disadvantaged populations because these patients are more likely to have uncoordinated and episodic care and often rely on emergency departments to receive services. Patient-centered medical homes can potentially narrow the health inequities that exist because of lack of access to health care and because of socioeconomic disparities.”